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Without financing, home ownership would likely remain out of reach for most people in this country. Few homebuyers have the means to pay the full purchase price in cash. Mortgages typically include a deed of trust granting the lender the right to foreclose on the property. The foreclosure process allows the lender to recover some or all of their investment if a borrower defaults. Most deeds of trust include a “power of sale” clause, which allows a trustee designated by the lender to sell the property without a court order. This is known as nonjudicial foreclosure. California foreclosure law protects homeowners by requiring trustees and lenders to follow a rigid process before selling a property. Federal law protects consumers from unscrupulous debt collection practices, but courts have reached differing conclusions about whether federal debt collection laws apply to nonjudicial foreclosure. The U.S. Supreme Court recently agreed to hear a case that raises this question, Obduskey v. McCarthy & Holthus LLP.The federal Fair Debt Collection Practices Act (FDCPA) prohibits “abusive, deceptive, and unfair debt collection practices” by debt collectors. 15 U.S.C. § 1692(a). It defines “debt collectors” as anyone who “collects or attempts to collect” debts owed to other people or businesses in interstate commerce, or who engages in such activities as a regular business. Id. at § 1692a(6). In addition to its prohibitions on misleading and abusive practices, the FDCPA also requires debt collectors, after contacting a consumer regarding an alleged debt, to provide them with information validating the debt. Id. at § 1692g.

California’s nonjudicial foreclosure laws also require notice and disclosures to debtors. A mortgage lender or trustee must provide notice to a borrower at least 30 days before filing a notice of default in the public record, and it cannot conduct a sale of the property for several months after that. Cal. Civ. Code §§ 2923.5, 2924. California homeowners’ associations (HOAs) can pursue nonjudicial foreclosure as a remedy for unpaid assessments, but only if the total delinquent amount is at least $1,800, or the delinquency has persisted for over 12 months. Id. at § 5730. In addition to various notice requirements, an HOA’s board must vote on the foreclosure at least 30 days before they may sell the property. Id. at § 5705.

The dispute in Obduskey arose from allegations that, among other violations, the lender failed to follow the procedures for validating the debt under § 1692g of the FDCPA. A Colorado federal court dismissed the lawsuit, finding that the lender was not a “debt collector” within the meaning of the FDCPA because it was responsible for servicing the loan before the plaintiff went into default. Obduskey v. Wells Fargo, 879 F. 3d 1216, 1219-20 (10th Cir. 2018). In other words, its responsibilities went beyond merely collecting unpaid amounts owed by the plaintiff.

Copyright law allows the owners of copyrighted works to control or prevent the use of those works by others. The Fair Use Doctrine sets limits on copyright owners’ ability to prevent certain unauthorized uses, such as the inclusion of a copyrighted image in a news report or the use of a copyrighted film clip by a film critic. Courts have also recognized an exception to copyright infringement when the unauthorized use of a copyrighted work is deemed “de minimis,” or too minor and trivial to merit court intervention. A recent New York court ruling, Gayle v. Home Box Office, Inc., No. 1:17-cv-05867, mem. op. (S.D.N.Y., May 1, 2018), addressed a de minimis claim in a case alleging copyright infringement. Courts have reached similar rulings in California intellectual property cases involving music, software, and other copyrighted works.Federal law allows copyright protection for “original works of authorship fixed in any tangible medium of expression.” 17 U.S.C. § 102(a). The owner of a copyrighted work has the exclusive right to use the work for a wide range of purposes, including making and distributing copies of the work and creating new derivative works. Id. at § 106. The Fair Use Doctrine allows certain unlicensed or unauthorized uses, however, “for purposes such as criticism, comment, news reporting, teaching…, scholarship, or research.” Id. at § 107. The statute identifies several factors to consider in determining whether Fair Use should apply, including the “substantiality” of the infringing use.

When a company does business across state lines, it may need to consider questions about jurisdiction over various potential disputes. An extensive and complicated body of law addresses when and how courts may exercise personal jurisdiction over defendants. Many contracts include “choice of law” or “forum selection” provisions, which identify a specific state and county as the proper jurisdiction and venue for lawsuits. The Delaware Court of Chancery recently ruled on a dispute over a choice of law provision, in which the defendant argued that the plaintiffs’ consent to jurisdiction in Kentucky required them to bring their lawsuit there. The court disagreed, noting that the contract did not “contain clear language indicating that litigation will proceed exclusively in the designated forum.” In re Bay Hills Emerging Partners I, L.P., et al, C.A. No. 2018-0234-JRS, mem. op. at 13 (Del. Ct. Chanc., Jul. 2, 2018).

Forum selection is an important part of any contract that involves parties in different jurisdictions, especially when relevant laws significantly differ from one another. This includes conflicts between the laws of two or more states, and conflicts between federal and state law. The parties to a contract need to know which laws will apply. Courts have developed rules and procedures for determining which jurisdiction’s laws apply in a particular situation, but that procedure is never simple or easy. Agreeing in advance to jurisdiction and venue can save a great deal of headache in many situations.

The defendant in Bay Hills is the official administrator of the Commonwealth of Kentucky’s retirement system. Through investments, it became the sole limited partner in four Delaware-based limited partnerships (LPs). It executed limited partnership agreements (LPAs) that included provisions allowing it to remove general partners “for cause.” Bay Hills at 4. In May 2017, the defendant exercised this right as to the general partners of all four LPs. It later withdrew its notice of removal, but served a second notice of removal on all four general partners in February 2018.Continue reading

Cybersecurity and data privacy are vital issues that business owners need to understand. Many Northern California businesses rely on the availability of customer data for their business operations. State and federal cybersecurity and privacy laws require businesses to take various steps to safeguard certain types of customer information. Businesses that have an international presence must also abide by certain international treaties and the laws of some foreign countries. Since 2015, the U.S. and the European Union (E.U.) have attempted to develop a framework that allows U.S. companies to transmit customer information from Europe, while protecting European consumers’ privacy. They agreed on a framework known as the “EU-US Privacy Shield” in 2016. A recent ruling from an Irish court, however, could significantly alter the flow of information from European consumers to U.S. businesses.

The Privacy Act of 1974, 5 U.S.C. § 552a, regulates the U.S. government’s use of information commonly known as “personally identifiable information” (PII). This includes names, addresses, Social Security and other identification numbers, and other information that can be used to identify a specific individual. The applicability of these protections to people outside the United States remains uncertain. Congress expanded the scope of the Privacy Act to include nationals of designated foreign countries in the Judicial Redress Act of 2015. Pub. L. 114-126, 130 Stat. 282 (Feb. 24, 2016). The White House, however, has directed federal agencies to “exclude persons who are not United States citizens or lawful permanent residents from the protections of the Privacy Act.” Exec. Order 13768, 82 Fed. Reg. 8799, 8802 (Jan. 30, 2017).

The U.S. and the E.U. developed a framework known as the International Safe Harbor Privacy Principles to address the handling of PII by private companies across national borders. The European Court of Justice (ECJ) ruled in 2000 that these principles were consistent with the E.U.’s Data Protection Directive, Directive 95/46/EC, which was in force at the time. The rise of social media, however, led to a complaint in 2014 from an Austrian citizen who was concerned about PII held by the social media company Facebook at its subsidiary facility in Ireland. Rather than concerns about identity theft, the complainant alleged that information submitted to Facebook would be subject to surveillance by the U.S. government.Continue reading

Patent law gives inventors and designers to the right to exclusive use of their creations. These rights are similar to those granted by trademark registration, but the process of applying for a patent is usually much more complicated. In the event of infringement, patent and trademark owners have the right to sue for damages and to enjoin further unauthorized uses. A pair of lawsuits filed earlier this year by two competing tech companies demonstrate both the complexity of patent law and the types of business disputes that can arise in connection with alleged patent infringement. California businesses are undoubtedly familiar with many of the patent issues raised in Match Group, LLC v. Bumble Trading Inc. (“Match”), No. 6:18-cv-00080, complaint (W.D. Tex., Mar. 16, 2018), as well as the business torts alleged by Bumble Trading Inc. v. Match Group, LLC (“Bumble”), No. DC-18-04140, orig. pet. (Tex. Dist., Dallas Cty., Mar. 28, 2018).

Federal law allows patent protection for “new and useful” inventions, or “any new and useful improvement thereof.” 35 U.S.C. § 101. Patents that cover “useful” inventions are commonly known as “utility patents.” A “design patent” covers “new, original and ornamental design[s]” that are associated with a product without affecting its function. Id. at § 171(a). Both types of patents are protected from infringement, defined to include “mak[ing], us[ing], offer[ing] to sell, or sell[ing]” patented material without permission. Id. at § 271.

A trademark is a name, phrase, logo, or other design “by which the goods of the applicant may be distinguished from the goods of others.” 15 U.S.C. § 1052. More general designs and shapes that are associated with particular products are known as “trade dress.” Trademark law protects trade dress to the extent that it serves to identify a product. Federal law allows trademark owners to sue for various acts constituting infringement, including unauthorized use of copies or reproductions of a trademark in ways that are likely to cause confusion or dilution. Id. at §§ 1114(a), 1125(a).Continue reading

Copyright law gives authors of creative works the ability to use those works in commerce, to license their use by others, and to prevent unauthorized use. This applies to a wide range of “works of authorship” that are “fixed in any tangible medium of expression.” See17 U.S.C. § 102(a). Copyright owners have various exclusive rights, subject to various limitations. A recent Ninth Circuit Court of Appeals decision addressed a limitation on exclusive rights to a pictorial work that may be relevant to California intellectual property cases. The court held that the allegedly infringing work, a logo used in athletic apparel, was not “substantially similar” to a photograph taken by the plaintiff over 40 years ago, and therefore it did not infringe the copyright. Rentmeester v. Nike, Inc., 883 F. 3d 1111 (9th Cir. 2018).

Copyright protection only extends to fixed forms of creative works, rather than the ideas behind the works. A work that uses similar concepts or ideas as a copyrighted work probably does not infringe that copyright unless it copies or reproduces specific, recognizable parts of the copyrighted work. The Ninth Circuit looks at whether a copyrighted work and an allegedly infringing work are “substantially similar” to each other. It outlined this standard in a decision involving the alleged infringement of Apple’s Macintosh operating system (OS) by Microsoft’s Windows OS in Apple v. Microsoft, 35 F.3d 1435 (9th Cir. 1994). The court looked at both “intrinsic” similarities “from the standpoint of the ordinary reasonable observer, with no expert assistance,” and “extrinsic…similarities in both ideas and expression.” Id. at 1442. It ruled against Apple’s infringement claims, concluding that the similar elements of the two OS’s were either licensed uses or were derived “from basic ideas and their obvious expression.” Id. at 1447. See alsoMattel, Inc. v. MGA Entertainment, Inc., 616 F. 3d 904, 913-14 (9th Cir. 2010).

The work at issue in Rentmeester is the “Jumpman” logo used by Nike on basketball shoes and other products. The logo is based on a famous photograph of the basketball player Michael Jordan, which was taken by the plaintiff in 1984. The photograph depicted Jordan, who had not yet begun his professional basketball career, in a unique pose “inspired by ballet’s grand jeté.” Rentmeester, 883 F.3d at 1115. Life Magazine published the photograph that year as part of coverage of the upcoming Summer Olympic Games in Los Angeles. The plaintiff licensed the photo to Nike that year “for slide presentation only.” Id. at 1116.

Both Bassett and Noble alleged violations of the Fair and Accurate Credit Transactions Act (FACTA) of 2003. This law amended the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq., with various provisions granting consumers access to their own credit information and protecting against identity theft. Thanks to FACTA, consumers can receive a copy of their credit report from each of the major credit reporting agencies once a year, free of charge.

The two Ninth Circuit cases alleged violations of FACTA provisions requiring the truncation of credit and debit card numbers, printing no “more than the last 5 digits of the card number or the expiration date,” on receipts provided to consumers at the point of sale. Id. at § 1681c(g). Willful noncompliance with these requirements can result in liability to an aggrieved consumer for damages of $100 to $1,000, as well as actual damages and attorney’s fees. Id. at § 1681n(a).Continue reading

Internet users are constantly creating new content. Sometimes, new content finds wide distribution on social media platforms—commonly known as “going viral”—and therefore gains commercial value for the creators. Trademark law can protect content creators’ exclusive rights to names, logos, and designs, and it allows them to license the use of the same to others. A jury in a California federal court recently found in favor of the owners of a trademark involving a cat, who has gained worldwide fame for her unique look. The trademark covers the cat’s likeness and her internet nickname, “Grumpy Cat.” The case involved a licensee who, according to the trademark owner, infringed the trademark by using the cat’s nickname and likeness in more ways than were allowed by the terms of the license. Grumpy Cat Limited v. Grenade Beverage LLC, No. 8:15-cv-02063, complaint (C.D. Cal., Dec. 11, 2015). After a five-day trial in January 2018, the jury awarded the trademark owner $710,001 in damages.

The federal Lanham Act defines a “trademark” as “any word, name, symbol, or device, or any combination thereof,” which a person is using or “has a bona fide intention to use” for business or commercial purposes. 15 U.S.C. § 1127. It prohibits the unauthorized use of a trademark in connection with the marketing, advertising, or sale of goods or services if it “is likely to cause confusion, or to cause mistake, or to deceive.” Id. at § 1114(1). It also prohibits unauthorized uses of a trademark that falsely designate the origin of goods or services, or that dilute the “distinctiveness” of a famous trademark. Id. at §§ 1125(a), (c).

License agreements allow individuals or businesses to use someone else’s trademark for commercial purposes, usually in exchange for a license fee or other compensation. Businesses may choose to do this in order to capitalize on a trademark’s popularity or goodwill. Trademark owners are responsible for monitoring not only compliance with the license agreement but also the quality of the goods and services that bear the trademark. Failing to do so is known as “naked licensing,” and it can result in the loss of trademark protection. Barcamerica Intern. v. Tyfield Importers, Inc., 289 F.3d 589, 596 (9th Cir. 2002).

A wide range of regulatory agencies monitor business activities, investigate alleged violations, and bring civil actions against companies they believe have committed unlawful acts. Many businesses designate executives or managers as compliance officers, in the hopes of identifying and preventing regulatory violations before they become actionable. Companies in some industries create separate organizations to serve as watchdogs over their members. Self-regulatory organizations offer the benefit of keeping official regulators at something of a distance, but their reliability depends on vigorously fulfilling their purpose. One example is the Advertising Self-Regulatory Council (ASRC), which has several divisions monitoring different aspects of the advertising business. One of these, the National Advertising Division (NAD), monitors national advertising campaigns to look for false or misleading claims and other deceptive practices. If it is unable to resolve a claim, it may refer the matter to a government agency. This recently happened with a company based in Northern California, which was accused of failing to disclose fees to consumers. The NAD referred the claims to the Federal Trade Commission (FTC).

The ASRC was founded in 1971 as an alliance between two advertising trade organizations and the Council of Better Business Bureaus (CBBB). Originally known as the National Advertising Review Council (NARC), the organization changed its name to the ASRC in 2012. The NAD conducts investigations based on its own monitoring of truth and accuracy in advertising, and it also receives claims of false advertising from competitors and consumers. In addition to the NAD, the ASRC has divisions monitoring advertising directed at children and various forms of online advertising. The National Advertising Review Board hears appeals of decisions made by the other divisions.

The FTC is a federal agency charged with enforcing multiple statutes dealing with consumer protection. The agency was created by the FTC Act of 1914, 15 U.S.C. § 41 et seq., which contains many of the provisions the FTC enforces. The statute prohibits numerous anti-competitive, deceptive, fraudulent, and otherwise unfair business practices. This includes the dissemination of “any false advertisement…for the purpose of inducing…the purchase in or having an effect upon commerce, of food, drugs, devices, services, or cosmetics.” Id. at § 52(a). The FTC is authorized to seek injunctive relief preventing the further dissemination of allegedly false advertising, and to bring suit for damages. Liability under these provisions is limited to a “manufacturer, packer, distributor, or seller” of a good or service, instead of an advertising agency or broadcaster. Id. at § 54(b).

California real estate development involves numerous potential risks, ranging from lost money on an investment to legal liability for injuries caused by hazards or defects. Determining who is liable for an injury often requires an extensive examination of ownership and any improvements made to the property. The owner of a piece of real estate might be liable for an injury caused by a hazard on their property under the theory of premises liability. Injuries—both personal injuries and financial losses—could also be a result of negligence by someone hired to work on the property. In 2014, the California Supreme Court ruled on a dispute between a homeowners association (HOA) for a San Francisco condominium project and two architectural firms involved in designing the project. The plaintiff alleged, on behalf of all of the homeowners, that negligent architectural designs led to defects that “made the condominium units uninhabitable and unsafe during certain periods due to high temperatures.” Beacon Residential Community Assn. v. Skidmore, Owings & Merrill LLP, 59 Cal.4th 568, 572 (2014). The court ruled in the plaintiff HOA’s favor.

One of the fastest growing forms of residential property is the “common-interest development,” in which separately owned residential units share common areas such as elevator lobbies, fitness centers, and pools. Developers create HOAs as private nonprofit organizations to handle the management and maintenance of common areas. An HOA has a legal duty, under premises liability law, to maintain common areas that are reasonably free of defects or hazards, and to warn residents, their guests, and others of known hazards on the premises. The Beacon case, in contrast, was about duties owed to an HOA with regard to defects on the property.

The plaintiff in Beacon was the HOA created for a 595-unit residential condominium project in San Francisco. The developer hired the defendants to “provide architectural and engineering services.” Beacon, 59 Cal.4th at 571. The defendants were aware “that the finished construction would be sold as condominiums.” Id. The plaintiff’s lawsuit alleged negligent design, which caused “several defects, including extensive water infiltration, inadequate fire separations, structural cracks, and other safety hazards.” Id. at 572. The allegation of uninhabitability during summer months arose from “solar heat gain” caused by a lack of ventilation and substandard windows. Id.

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